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The FTSE 100‘s enjoyed strong gains in 2025, but not all UK blue-chip shares have fared well.
Barratt Redrow (LSE:BTRW) and Diageo (LSE:DGE) have both endured double-digit share price drops since 1 January. It’s left them trading on dirt-cheap earnings and book ratios which — in my opinion — could help them rally in the New Year.
Wondering what could spark them into life in 2026? Read on.
Builder boom?
A deteriorating domestic economy has hit Barratt Redrow and other housebuilding shares hard. It’s no surprise, as trends like rising unemployment can hammer demand for new homes.
I think the market may have overreacted here, however. And especially considering the brighter outlook for the housing market next year.
Sure, economic conditions are tough. But falling interest rates and a bloody mortgage rate war are having a net positive impact on the industry.
Reflecting this, building society Nationwide has predicted average house prices could rise up to 4% next year. It predicted housing market activity to strengthen a little further as affordability improves gradually (as it has done in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates.
As the UK’s biggest housebuilder, Barratt’s well placed to seize this opportunity. It’s targeting 17,200 to 17,800 homes this financial year (to June 2026). Its medium target is set substantially higher, at 22,000 per year.
Recently announced property tax changes might cause problems for the FTSE firm. But Nationwide views this threat as insignificant — it notes that new rules from April 2028 “will apply to less than 1% of properties in England and around 3% in London.”
Barratt’s share price has dropped 18% year to date. Its price-to-book (P/B) ratio is just 0.7, suggesting a healthy discount to the value of the firm’s assets. It’s a reading that could prompt strong interest from value investors if news flow improves.
Another comeback story?
Diageo’s been one of the FTSE 100’s biggest losing shares, not just in 2025 but over several years now.
The Guinness owner’s slumped 34% since 1 January. It takes total paper losses during the past three years to 55%.
Could the appointment of recovery specialist Dave Lewis as chief executive help it rebound? As a Diageo shareholder myself, I’m optimistic it can.
November’s appointment could have significant and far-reaching positive implications, in the City’s view. Analysts at RBC Capital say Lewis was installed not just because Diageo’s board thinks he has the wherewithal to accelerate sales growth and efficiencies but also because he has CEO experience and was identified as a catalyst for cultural change.
The drinks giant faces a number of hurdles, from weak consumer spending to falling alcohol consumption among younger people. But it also has multiple drivers for long-term growth in its locker, from market leading labels and a fantastic record of innovation, to heavy emerging market exposure.
Its excellent progress in non-alcoholic categories is especially encouraging as Western consumer tastes evolve.
Today Diageo’s share price commands a price-to-earnings (P/E) ratio of just 13.5 times. That’s well below the 10-year average of 21.1 times, and could support a sharp rebound from 2026 if green shoots of recovery appear.
